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Gaming Guru

Richard N. Velotta
 

MGM Resorts reports stronger earnings despite revenue decline

5 May 2015

Coming off one of the most lucrative weekends in company history by hosting “the fight of the century,” MGM Resorts International on Monday reported first-quarter earnings that exceeded analysts’ expectations, on revenue that dipped 11.3 percent from a year ago.

The Las Vegas-based company, the state’s largest private employer, reported earnings of $169.8 million, 33 cents a share, on revenue of $2.33 billion for the quarter that ended March 31. That compares with earnings of $102.7 million, 20 cents a share, on revenue of $2.63 billion.

Analysts expected earnings of 14 cents a share and revenue of $2.4 billion.

The revenue decline was attributed to 33 percent drop in the Macau market as well as a tough comparison from last year with a major convention occurring in the city in Las Vegas in March 2014.

Domestically, occupancy rates and average daily room rates inched up and the company also benefited from a settlement on the CityCenter Harmon property.

The company paid its first CityCenter dividend on Friday, a $400 million payout. The disbursement was a special dividend to CityCenter shareholders MGM and Dubai World.

In Las Vegas, occupancy rates were generally off compared with last year, thanks mostly to the company’s stellar 2014 first quarter, which included the presence of the ConExpo-Con/Agg construction equipment trade show in March. Of MGM’s nine Las Vegas properties, only Circus Circus Hotel Casino - Las Vegas had a higher occupancy rate this year compared with the first quarter of 2014.

But room rates crept up in all nine of MGM’s properties in the 2015 quarter.

Chairman and CEO Jim Murren said in a conference call with investors that Saturday’s championship boxing match in which Floyd Mayweather defeated Manny Pacquiao was one of the most successful events the company has ever hosted and that it exemplifies how Las Vegas excels at staging entertainment and special events.

Murren thanked first responders for their work during the event and said they not only benefited MGM, but all of Las Vegas and other local companies.

Results from the fight weekend won’t be realized until the second quarter.

Murren noted that the weekend demonstrated the potential of large special events and how the company’s new arena, in partnership with AEG, would be a game-changer.

“We have signed contracts for over half of the suites (of the new arena) and are in contact on about another 30 percent of them,” Murren said. “We believe that this is another validation that this facility will be a game-changer in the market and it will be the best-in-class setting for entertainment, music, sports as well as creating opportunities to bring new events to the city. As we saw this past weekend, events are a key driver to visitation and profitability.”

Murren also referenced the brewing proxy fight with Land and Buildings, the small investor seeking to oust four MGM board members and replace them with their own nominees.

“This proxy contest is truly unwarranted as the board and the management team are well-equipped to create value, having done so before, and we’re well-equipped to look at (real-estate investment trusts) and any other opportunity,” Murren said. “The stock is done very well over the last five years, up 135 percent, and I’m proud that we’ve been able to rebuild this company throughout this post-recession period.”

Murren ended the discussion by tweaking Land and Buildings.

“I have to just say I’m sorry that we’re going through this,” Murren said. “I’m sorry that it’s evolved into a tabloidlike campaign and it shouldn’t happen.”

Shares of MGM lost 13 cents, or 0.61 percent, to close at $21.27 on Monday on more than twice average trading volume.
MGM Resorts reports stronger earnings despite revenue decline is republished from Online.CasinoCity.com.